Chinese investment in Brazil triples in 2021 and makes the country the main destination for investments

With new projects and large acquisitions, mainly in the energy and information technology sectors, investment by Chinese companies in Brazil more than tripled in 2021, returning to pre-pandemic levels.

Although the result is influenced by the weak basis of comparison with 2020, the numbers show that the country was the main destination for Chinese capital last year.

Among the outstanding operations are the investments made by Tencent in fintechs and startups such as Nubank, QuintoAndar and Cora; the acquisition of the power transmission company in Rio Grande do Sul by State Grid and the purchase of the Mercedes-Benz plant in Iracemápolis (SP) by Great Wall Motors, in addition to billionaire investments by Chinese oil giants in the Santos Basin.

The presence of the Chinese in Brazil also gained prominence in the presidential campaign. Minister Paulo Guedes (Economy) told businessmen he did not want “the ‘Chinese’ entering here, breaking our factories, our industries, under no circumstances”.

Former President Lula (PT) also expressed concern to businessmen about the Asian country’s progress in manufacturing manufactured products and said that China “is occupying Brazil”, “taking care of Brazil”.

A report by the Brazil-China Business Council to be released this Wednesday (31) shows that the Asian country’s investment in national territory totaled US$ 5.9 billion in 2021, an amount 208% higher than in 2020 in nominal terms, the year of drop because of the pandemic, and the highest in four years – the numbers do not consider inflation, which last year was 7% in the US.

28 projects were listed, the same number as in 2017, and the second largest ever recorded in the historical series started in 2010.

In South America, disregarding Brazil, Chinese investments grew 30% last year. Worldwide, the increase was just 3.6%.

Brazil was the country that received the most investments from China in the period, with a share of 13.6% of the total. Since 2005, it has been the fourth largest recipient (4.8% of the total).

In terms of values, the oil sector was predominant, accounting for 85% of the total. In terms of project numbers, the highlights were electricity and information technology (IT).

Outstanding Operations

• China’s CNODC and CNOOC signed an agreement with Petrobras for a co-participation in the Búzios field, in the pre-salt layer of the Santos Basin
• Great Wall Motors bought the Mercedes-Benz car plant in Iracemápolis (SP)
• Tencent, the largest Chinese technology conglomerate, which entered Brazil in 2018, made investments in Nubank, QuintoAndar, fintech Cora, Omie and Freight
• MSA Capital made three new investments in Brazil: in Nubank and in foodtechs Cayena and Favo
• Chinese group Ant Financial, fintech from Alibaba, bought 5% of Dotz
• CPFL, a subsidiary of State Grid, won the privatization auction of CEEE-T (Rio Grande do Sul power transmission company), with a bid of R$ 2.6 billion

Source: Chinese Investments in Brazil 2021 – Brazil-China Business Council

Responsible for the study, the content and research director of the Brazil-China Business Council, Tulio Cariello, says that the IT sector should stand out again in 2022, along with agriculture, considering the projects announced so far.

The technology area was an outlier, according to him. There were ten projects, almost a third of the total, in this area — practically the same number verified in the accumulated from 2007 to 2020 (12 projects).

Cariello says that Chinese investments abroad have gone through two distinct moments in recent years. The first was a year-on-year growth until 2016, when they reached US$ 170 billion, followed by a stable level close to US$ 120 billion since then, with “more rational” investments after previous exaggerations, in the expert’s assessment.

Regarding concerns about the advance of investments by the Asian country in Brazil, Cariello says that many of the inputs used by national industries are of Chinese origin, which helps to make these products cheaper and improve their competitiveness.

He also highlights that half of the deals registered in 2021 were new projects and that the acquisitions have been accompanied by investments to modernize Brazil’s industrial park and infrastructure.

The specialist also points out that some operations, such as the purchase of the Mercedes-Benz plant, help to save jobs in the country.

“I don’t think China is breaking Brazil. What exists is a lack of national competitiveness, which is a chronic factor. It is very visible that these Chinese investments contribute to heating up the economy,” he says.

“I see this as an advantage. You are modernizing our industrial park and often saving companies from bankruptcy.”